Summary Report of DoD Compliance With the Berry Amendment and the Buy American Act

We determined whether the DoD awarded contracts that complied with the Berry Amendment and the Buy American Act when purchasing covered items such as food, clothing, tents, textiles, and hand or measuring tools.

Background

This report is a summary of the DoD Office of Inspector General’s four prior audits of the Military Services’ and the Defense Logistics Agency’s (DLA) compliance with the Berry Amendment and the Buy American Act. We conducted the audits in response to Section 1601 of the National Defense Authorization Act for FY 2014.

We summarized the four nonstatistical samples from the four prior reports of 109 contracts, valued at $598.6 million, awarded for items subject to the Berry Amendment and 171 contracts, valued at $11.4 million, awarded for items subject to the Buy American Act. The prior four reports identified 86 deficiencies on 280 contracts awarded by 18 contracting offices and made 35 recommendations to the Military Services and DLA to correct the deficiencies. This report summarizes the primary deficiencies identified in the prior four reports and makes recommendations to the Director, Defense Pricing/Defense Procurement and Acquisition Policy, that address causes for the deficiencies that were common among the Military Services and the DLA.

The Berry Amendment directs DoD personnel to ensure funds appropriated or otherwise available to the DoD are not used to procure covered items if the items were not grown, reprocessed, reused, or produced in the United States. The Buy American Act requires, with certain exceptions, that only articles, materials, and supplies that were mined, produced, or manufactured in the United States are used to fulfill Federal procurement and construction contracts.

Findings

We determined that DoD contracting personnel complied with the Berry Amendment for 69 of 109 contracts we reviewed, with an obligated value of $387 million. However, contracting personnel did not comply with the Berry Amendment for the remaining 40 contracts, with an obligated value of $211.6 million. We identified 41 deficiencies on 40 contracts.

Specifically, DoD contracting personnel:

did not include the required Berry Amendment clause in 33 contracts because contracting officers were unfamiliar with the Berry Amendment and applicable Defense Federal Acquisition Regulation Supplement (DFARS) implementing clauses, relied on their electronic contract writing systems to include the implementing clause, and made administrative errors;

did not prepare award notices containing Berry Amendment exception language when procuring foreign-made items on four contracts because contracting personnel were unaware of the requirement and relied on the electronic contract writing systems to generate and post award notices for them; and

improperly purchased foreign-made items or items containing nondomestic components on four contracts without preparing supporting documentation or obtaining approval because they misinterpreted the Berry Amendment and DFARS requirements or did not provide adequate contractor oversight.

As a result, for 40 of the 109 contracts reviewed, DoD contracting personnel had limited assurance that items purchased on contracts complied with the Berry Amendment; did not notify the public of the lack of domestically-produced products; and committed potential Antideficiency Act violations by using appropriated funds to procure items not grown, reprocessed, reused, or reproduced in the United States.

We also found that DoD contracting personnel complied with the Buy American Act for 130 of 171 contracts reviewed, with an obligated value of $8.8 million, but did not comply with the Buy American Act for the remaining 41 contracts, with an obligated value of $2.6 million. We identified 42 deficiencies on 41 contracts. Specifically, DoD contracting personnel

omitted the required Buy American Act clauses on 36 contracts because they were unfamiliar with the Buy American Act, did not complete a sufficient review of contracts before award, operated outside their functional area, or relied on the electronic contracting writing systems to include the implementing clause, and

improperly purchased foreign-made items on six contracts because they awarded a contract for an excepted item without obtaining proper approval, prepared a domestic nonavailability determination when domestic sources were available, did not ensure items purchased were domestic end products, or did not identify a foreign supplier as being ineligible for contract award.

As a result, DoD contracting personnel had limited assurance that items purchased on contracts complied with the Buy American Act and committed potential Antideficiency Act violations by using appropriated funds to procure foreign-made items.
Corrective Actions Taken

As a result of our audits, the Military Services and DLA officials took actions to correct deficiencies identified during the audits and implemented changes in response to our report recommendations. Specifically, DoD contracting personnel modified contracts with the required Berry Amendment and Buy American Act implementing clauses, determined whether noncompliant items were delivered and, when appropriate, removed any items that were not produced in the United States and obtained replacement items. In addition, DoD contracting personnel issued a local notice to reinforce compliance with the Berry Amendment and the Buy American Act, required Berry Amendment and Buy American Act training, and updated standard operating procedures.
Recommendations

We made specific recommendations in the four prior reports to the Services and DLA. The recommendations in this report relate to systemic problems across DoD and not to a specific Service or DLA.

We recommend that the Director, Defense Pricing/Defense Procurement and Acquisition Policy, re-emphasize guidance on the requirement to incorporate and enforce the Berry Amendment and the Buy American Act provisions and clauses in applicable solicitations and contracts. We also recommend that the Director re-emphasize the DFARS requirements regarding exceptions to the Berry Amendment. Finally, we recommend that the Director re-emphasize that the various electronic contract writing systems used by the Military Services and DLA should incorporate the requirements of the Berry Amendment and the Buy American Act, such as including clauses and posting award and exceptions notices, into their electronic systems.

Management Comments

The Director, Defense Pricing/Defense Procurement and Acquisition Policy, agreed with our recommendations to re-emphasize guidance to DoD contracting personnel on procuring items subject to the Berry Amendment and the Buy American Act. The Director stated that the Department will address the recommendation in conjunction with addressing an anticipated recommendation from the Director, Office of Management and Budget and Secretary of Commerce to provide additional guidance and information to DoD contracting personnel as a result of an assessment of compliance with the April 18, 2017, Executive Order 13788, “Buy American and Hire American.” Therefore, the recommendations are resolved and will be closed after Defense Pricing/Defense Procurement and Acquisition Policy personnel provide documentation to verify that the Department issued the recommended guidance.